What is a corporation?

As opposed to other types of business entities, a corporation has a separate and distinct legal existence from its owners. The law treats corporations as if they are people, allowing them to take on liabilities, enter into contracts, sue and be sued in their own names, and pay taxes separately from their owners, which are called shareholders.

Because of this trait, corporations may continue in existence indefinitely. Therefore, corporations only end when they are legally dissolved under state law, not when the owners change or die.

The last important characteristic of corporations is that their owners have limited liability. This means that the owners may not be held personally liable for their company’s debts unless they agree. Instead, the corporation itself is responsible for repaying debts as well as paying off any legal judgments that may be awarded against it.